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Greenback Recoups Monday Losses, GBP Fades Alongside BoE Terminal Pricing

FOREX
  • The greenback is furtively firmer just ahead of NY hours, with the USD Index recouping a large part of yesterday's losses, which are deemed corrective at these levels. The USD Index remains comfortably inside the medium-term uptrend drawn off the July low, and the trend will resume on gains back above 105.157.
  • Meanwhile, the single currency is among the poorest performers, largely a function of USD strength and the proximity to Thursday's ECB release. Markets remain evenly split on those seeing further tightening from the governing council this week, and those seeing a pause for policy rates at this juncture. EUR/USD printed a pullback low at 1.0712, but steered clear of fresh weekly lows.
  • Rates rallied on the back of the UK labour market report, with some BoE-dated OIS contracts shedding as much as 6bps, prompting the terminal policy rate to slip back below 5.65%. Rate differentials and some broader USD demand have weighed on cable, with spot slipping as low as 1.2463, taking out the first downside level at 1.2472,. 1.2446 is the next notable support, marking last week's base and the lowest print since the 8 June.
  • There are few datapoints or macro releases due Tuesday, with both the ECB and Federal Reserve inside their pre-decision media blackout periods. The next data of note crosses tomorrow, with the US CPI release for August.
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